Wednesday, March 24, 2010

JP Morgan's Grand Theft Larceny at the Expense of the Taxpayer

JPM is cutting a deal with your Government that will enable it to receive a $1.4 billion tax refund.  This refund accrued to JPM from its takeover of Washington Mutual. The bondholders of Wamu will also receive a cash rebate from Obama.  Here's the news link: LINK

If you do the math, you'll find that JPM paid $1.9 billion for Wamu. This means that, with the $1.4 billion tax refund, the Taxpayers have paid for 73.6% of JPM's purchase of Wamu. It then sold off anything not of use and wrote-up the value of the toxic assets it acquired, some of which were no doubt sold to the Fed with funding that is backed by the Treasury.

Now, here's that game they played with the assets they kept. They haggled with FDIC over the value of Wamu's toxic assets in order to write them down to an unreasonably low level: "Seriously Sheila (FDIC chief dope Sheila Bair) these things are illiquid and mostly worthless." The FDIC (read: You, the Taxpayer) was stuck with the tab for the difference in value between JPM's/the Taxpayer's $1.9 billion purchase and the amount that was written off pre-purchase.

Then, with TARP and all the other trillions thrown into the system, JPM has been able to write up the rest of Wamu's assets that they haven't liquidated to the tune of $10's of billions, recognize paper income in the billions, and receive Fed funding against the marked up assets in order to fund compensation. This has been a money printing machine for JPM which has been financed by the Taxpayers.

If I took the time to go thru JPM's last 2 years of 10-Q's/10-K's, I'm sure I could quantify with some accuracy the amount of money JPM has manufactured from its "purchase" of Wamu AND the amount of money transfered directly and indirectly from Taxpayers and investors into JPM's coffers. Suffice it to say that it's in the several $10's of billions, on what is now a $500 million net investment by JPM.

Further suffice it to say that the Taxpayers are getting screwed more ways than a porno actress with 20 years of film credits. I'm sure Obama, Geithner, Bernanke, Blankfein, Dimon and Henry Paulson are accepting your expressions of gratitude.


  1. This just proves you can have it both ways--write offs for taxes and mark to fantasy for book purposes.

  2. Dave isn't the fed's qe program set to expire this month???
    p.s. did you finish reading the posts by "another"?

  3. anliu the mortgage qe ends on 3/31 - theoretically. as for Treasury QE. if you look at the primary dealer takedown of almost every Treasury auction this month, the Fed is essentially funding the PD's to take over 50% of most of the auctions. Even yesterdays' 2-yr. auction - and typically foreigners take a lot of the shorter paper issued.

    I'm about 1/2-way thru "another" posts. Thanks for turning me on to that. Someone linked this blog yesterday, which I have visited in the past but had no idea it was connected to "another:"

    Friend Of A Friend Of Another